par John R. Fischer
, Senior Reporter | October 09, 2020
STERIS has acquired Key Surgical, a portfolio company of Water Street Healthcare Partners, for approximately $850 million.
Facilitated through a U.S. subsidiary, the acquisition brings together the expertise of two manufacturers in the disinfection and surgical arenas.
“Key Surgical has three primary areas of Customer focus in Healthcare facilities: sterile processing departments, operating rooms and endoscopy suites — the same three primary call points for STERIS Healthcare,” Stephen Norton, senior director of corporate communications at STERIS, told HCB News. “Their focus on customer satisfaction and new products fits well with STERIS' culture.”
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STERIS is known for its infection prevention solutions, such as sterilizers and washers, as well as surgical tables, lights and equipment management systems, and connectivity solutions, such as operating room integration. It also produces consumable products such as detergents and gastrointestinal endoscopy accessories.
In business since 1988, Key Surgical manufactures products for instrument cleaning, instrument protection, procedure support, sterile field support, surgical accessories, and infection protection for endoscopes. It is expected to strengthen, complement and expand the product offering of STERIS’ core healthcare customers globally by leveraging existing call points within hospitals and surgical centers and filling gaps in its product offering.
The transaction will be financed through a combination of debt and cash on hand, and is anticipated to close by December 31, 2020 pending customary closing conditions and regulatory approval. Adjusting for the present value of the expected tax benefit, the price effectively drops to approximately $810 million.
STERIS will purchase the shares of Key Surgical at closing, and the transaction is expected to be immediately accretive to STERIS’ adjusted earnings after closing, and boost revenue by approximately $40 million and adjusted earnings per diluted share in STERIS’ fiscal 2021 fourth quarter by about $0.10.
“Key Surgical is an excellent strategic fit with STERIS,” said Norton. “It adds a significant and growing recurring revenue stream, solid profitability, and the additional ability to serve our existing call points in our Healthcare Customers.”
STERIS expects to realize annualized pre-tax earnings synergies of $10 – $15 million by year three following the closing.
Annual revenue for Key Surgical is anticipated to be approximately $170 million, with adjusted EBIT of approximately $50 million in calendar year 2020.
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